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Illicit Drug Sales Online Boost Offline Markets

In October of 2013, the Federal Bureau of Investigation (FBI) shut down Silk Road, the first major illegal online drug marketplace on what is referred to as the “dark web.” The dark web is an entirely different internet that lives on “darknets,” which are overlay networks that still use the public internet but that cannot be accessed without the necessary software, configurations, or authorizations. The dark web is a small corner of the “deep web,” which is the part of the internet that cannot be reached via a search engine.

In other words, it’s where all the bad things live, and a place that you probably don’t want to visit.

That being said, ever since the FBI brought Silk Road to an end, approximately 50 or so similar dark markets (“cryptomarkets”) have popped up to take over where Silk Road left off insofar as conducting transactions with customers of illegal substances. Researchers at the University of Manchester and the University of Montreal have concluded that illicit drug transactions on the dark web have tripled since Silk Road was shut down, covering a period from September of 2013 up to and including January of 2016.

The drugs that are being sold are similar to those that were sold through Silk Road, but there has been a significant jump in the number of orders placed that total over $1,000. Researchers glean from this that the transactions are being made with drug dealers who are looking to stock up for the purposes of selling drugs offline.

These larger orders account for a quarter of the revenue that has been brought in during the aforementioned three-year period, which proves that a large sector of the dark market involves business-to-business transactions, rather than business-to-consumer transactions.

Cryptomarkets wear their stock on their sleeves with similar storefronts to Amazon and other online marketplaces; cryptomarkets advertise comprehensive details about each product, as well as ratings and reviews from customers, in order to fuel customer expectations of better-quality products that are available in a wide variety.

Because transactions on the dark web are anonymous, and because vendors and buyers assume that these transactions are safer to conduct, drugs and other illicit goods are regularly traded online and under the radar. Most of the revenue from these transactions comes in via intracontinental sales, which means that transactions were being conducted within North America or within Europe so that borders did not need to be crossed in order to make the deliveries.

It is believed that because domestic transactions are preferred over international transfers because vendors believe there is a lessened risk of interception by law enforcement. It is also possible that this is why recreational drug use is on the rise in the U.S., as there are more American sellers peddling their wares in dark markets online.

For a quick example of just how lucrative these dark markets can become, monthly revenue for Silk Road right up until the month before it was taken down came close to $7 million. At the beginning of 2016 alone, eight cryptomarkets - which make up 80 percent of the dark market - brought in, collectively, over $14 million.